# 6.4 Solve simple interest applications

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By the end of this section, you will be able to:
• Use the simple interest formula
• Solve simple interest applications

Before you get started, take this readiness quiz.

1. Solve $0.6y=45.$
If you missed this problem, review Decimals and Fractions .
2. Solve $\frac{n}{1.45}=4.6.$
If you missed this problem, review Decimals and Fractions .

## Use the simple interest formula

Do you know that banks pay you to let them keep your money? The money you put in the bank is called the principal , $P,$ and the bank pays you interest , $I.$ The interest is computed as a certain percent of the principal; called the rate of interest , $r.$ The rate of interest is usually expressed as a percent per year, and is calculated by using the decimal equivalent of the percent. The variable for time, $t,$ represents the number of years the money is left in the account.

## Simple interest

If an amount of money, $P,$ the principal, is invested for a period of $t$ years at an annual interest rate $r,$ the amount of interest, $I,$ earned is

$I=Prt\phantom{\rule{2em}{0ex}}$

where

$\begin{array}{ccc}\hfill I& =& \text{interest}\hfill \\ \hfill P& =& \text{principal}\hfill \\ \hfill r& =& \text{rate}\hfill \\ \hfill t& =& \text{time}\hfill \end{array}$

Interest earned according to this formula is called simple interest    .

The formula we use to calculate simple interest is $I=Prt.$ To use the simple interest formula we substitute in the values for variables that are given, and then solve for the unknown variable. It may be helpful to organize the information by listing all four variables and filling in the given information.

Find the simple interest earned after $3$ years on $\text{500}$ at an interest rate of $\text{6%.}$

## Solution

Organize the given information in a list.

$\begin{array}{ccc}\hfill I& =& ?\hfill \\ \hfill P& =& \text{500}\hfill \\ \hfill r& =& \text{6%}\hfill \\ \hfill t& =& \text{3 years}\hfill \end{array}$

We will use the simple interest formula to find the interest.

 Write the formula. $I=Prt$ Substitute the given information. Remember to write the percent in decimal form. $I=\left(500\right)\left(0.06\right)\left(3\right)$ Simplify. $I=90$ Check your answer. Is $90 a reasonable interest earned on$500 in 3 years? In 3 years the money earned 18%. If we rounded to 20%, the interest would have been 500(0.20) or $100. Yes,$90 is reasonable. Write a complete sentence that answers the question. The simple interest is $90. Find the simple interest earned after $4$ years on $\text{800}$ at an interest rate of $\text{5%.}$$160

Find the simple interest earned after $2$ years on $\text{700}$ at an interest rate of $\text{4%.}$

$56 In the next example, we will use the simple interest formula to find the principal. Find the principal invested if $\text{178}$ interest was earned in $2$ years at an interest rate of $\text{4%.}$ ## Solution Organize the given information in a list. $\begin{array}{ccc}\hfill I& =& \text{178}\hfill \\ \hfill P& =& ?\hfill \\ \hfill r& =& \text{4%}\hfill \\ \hfill t& =& \text{2 years}\hfill \end{array}$ We will use the simple interest formula to find the principal.  Write the formula. $I=Prt$ Substitute the given information. $178=P\left(0.04\right)\left(2\right)$ Divide. $\frac{178}{0.08}=\frac{0.08P}{0.08}$ Simplify. $2,225=P$ Check your answer. Is it reasonable that$2,225 would earn $178 in 2 years? $I=Prt$ $178\stackrel{?}{=}2,225\left(0.04\right)\left(2\right)$ $178=178✓$ Write a complete sentence that answers the question. The principal is$2,225.

Find the principal invested if $\text{495}$ interest was earned in $3$ years at an interest rate of $\text{6%.}$

$2,750 Find the principal invested if $\text{1,246}$ interest was earned in $5$ years at an interest rate of $\text{7%}.$$3,560

Now we will solve for the rate of interest.

Find the rate if a principal of $\text{8,200}$ earned $\text{3,772}$ interest in $4$ years.

## Solution

Organize the given information.

$\begin{array}{ccc}\hfill I& =& \text{3,772}\hfill \\ \hfill P& =& \text{8,200}\hfill \\ \hfill r& =& ?\hfill \\ \hfill t& =& \text{4 years}\hfill \end{array}$

We will use the simple interest formula to find the rate.

 Write the formula. $I=Prt$ Substitute the given information. $3,772=8,200r\left(4\right)$ Multiply. $3,772=32,800r$ Divide. $\frac{3,772}{32,800}=\frac{32,800r}{32,800}$ Simplify. $0.115=r$ Write as a percent. $\text{11.5%}=r$ Check your answer. Is 11.5% a reasonable rate if $3,772 was earned in 4 years? $I=Prt$ $3,772\stackrel{?}{=}8,200\left(0.115\right)\left(4\right)$ $3,772=3,772✓$ Write a complete sentence that answers the question. The rate was 11.5%. #### Questions & Answers Application of nanotechnology in medicine what is variations in raman spectra for nanomaterials Jyoti Reply I only see partial conversation and what's the question here! Crow Reply what about nanotechnology for water purification RAW Reply please someone correct me if I'm wrong but I think one can use nanoparticles, specially silver nanoparticles for water treatment. Damian yes that's correct Professor I think Professor what is the stm Brian Reply is there industrial application of fullrenes. What is the method to prepare fullrene on large scale.? Rafiq industrial application...? mmm I think on the medical side as drug carrier, but you should go deeper on your research, I may be wrong Damian How we are making nano material? LITNING Reply what is a peer LITNING Reply What is meant by 'nano scale'? LITNING Reply What is STMs full form? LITNING scanning tunneling microscope Sahil how nano science is used for hydrophobicity Santosh Do u think that Graphene and Fullrene fiber can be used to make Air Plane body structure the lightest and strongest. Rafiq Rafiq what is differents between GO and RGO? Mahi what is simplest way to understand the applications of nano robots used to detect the cancer affected cell of human body.? How this robot is carried to required site of body cell.? what will be the carrier material and how can be detected that correct delivery of drug is done Rafiq Rafiq if virus is killing to make ARTIFICIAL DNA OF GRAPHENE FOR KILLED THE VIRUS .THIS IS OUR ASSUMPTION Anam analytical skills graphene is prepared to kill any type viruses . Anam what is Nano technology ? Bob Reply write examples of Nano molecule? Bob The nanotechnology is as new science, to scale nanometric brayan nanotechnology is the study, desing, synthesis, manipulation and application of materials and functional systems through control of matter at nanoscale Damian Is there any normative that regulates the use of silver nanoparticles? Damian Reply what king of growth are you checking .? Renato What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ? Stoney Reply why we need to study biomolecules, molecular biology in nanotechnology? Adin Reply ? Kyle yes I'm doing my masters in nanotechnology, we are being studying all these domains as well.. Adin why? Adin what school? Kyle biomolecules are e building blocks of every organics and inorganic materials. Joe anyone know any internet site where one can find nanotechnology papers? Damian Reply research.net kanaga sciencedirect big data base Ernesto Introduction about quantum dots in nanotechnology Praveena Reply hi Loga what does nano mean? Anassong Reply nano basically means 10^(-9). nanometer is a unit to measure length. Bharti how did you get the value of 2000N.What calculations are needed to arrive at it Smarajit Reply Privacy Information Security Software Version 1.1a Good A soccer field is a rectangle 130 meters wide and 110 meters long. The coach asks players to run from one corner to the other corner diagonally across. What is that distance, to the nearest tenths place. Kimberly Reply Jeannette has$5 and \$10 bills in her wallet. The number of fives is three more than six times the number of tens. Let t represent the number of tens. Write an expression for the number of fives.
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